Coming attraction: Derivatives trading on the NSE

Stakeholders of the Nigerian capital market have expressed confidence that the Nigerian capital market will receive a further boost in 2017 with the expected introduction of derivatives to boost market offering.

The Nigerian Stock Exchange (NSE) currently only offers shares, bonds and exchangetraded funds (ETFS). The derivatives expected to have been introduced in 2016 based on NSE’s earlier plan, is however expected by stakeholders to be welcomed into the NSE offerings in 2017.

Some stock brokers who spoke to Daily Times on condition of anonymity said that even as the market has remained largely bearish, the anticipated introduction of derivatives in the market will boost market offerings, vibrancy, and depth.

The expected introduction of derivatives is in fulfillment of the exchange’s earlier promise to introduce five asset classes in five years on the assumption of office by Oscar Onyema as the NSE’ Chief Executive Officer in April 2011. A financial derivative is one of the financial instruments used in sophisticated stock markets.

The financial instrument’s price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations or growth in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes “A lot of work is going on,” Onyema had assured earlier, adding: “The market is considering futures and options on both single stocks and equity indices among financial derivatives”. Before the introduction of Index/Exchange traded funds (ETF) following approval by the Securities and Exchange Commission (SEC) the NSE CEO assured that bourse “would also consider the addition of Options and Derivative”